Market Looks To 'Improved' US Data As Gold, Silver Reverse Rally

December 2, 2013

FRIDAY'S late 1.1% rally in gold was reversed in Asian and London trade Monday morning, with the metal trading back below $1240 per ounce as world stock markets also slipped with commodities.

Silver tracked gold lower, falling from $20 per ounce at the start of Asian dealing to hit near 1-week lows $19.63.

The rising Pound meantime, touching its highest level since Sept.2011 after stronger-than-forecast UK house price and manufacturing data, pushed gold in Sterling terms down to new 3-year lows beneath £755 per ounce.

"We are looking for a push toward the [Dollar] range lows near $1180," says London market-maker Barclays in a note, pointing to the 3-year low gold hit at end-June.

"It would take a break back above former range lows in the 1520 area to suggest any kind of a base developing...If equity markets remain firm and if prices breach $1200, the weakness is likely to be exacerbated."

"Many countries stock exchanges," Germany's Der Spiegel quotes economist and financial historian Robert Shiller, "are at a high level, and prices have risen sharply in some property markets.

"I am most worried about the boom in the US stock market...because our economy is still weak and vulnerable."

But looking ahead to Friday's US jobs data in the monthly Non-Farm Payrolls report, "as long as US economic data shows improvement, the probability of sooner-than-later tapering becomes more real," says chief investment strategist Wang Xiaoli at China brokerage CITICS Futures Co.

With officials from the US Federal Reserve saying again last week that better jobs data could spur them to cut the $85 billion of monthly quantitative easing in place since end-2012, "That should keep downward pressure on gold," reckons Wang.

Gold managed "something of a recovery at the end of last week," says one London trading desk in a note.

Friday's rally, reckons Edward Meir writing for US brokerage INTL FCStone, came "on news of political tensions emanating out of Asia," with China's airforce scrambling jets in response to Japanese and US flights over airspace claimed by the Communist state.

US vice president Biden is this week visiting China, Japan and South Korea.

Looking at the gold market, "Physical flows were limited last week with the Thanksgiving holiday," says a note from ANZ Bank, "but light physical related selling [was] seen above $1250 per ounce."

New data released Friday by the London Bullion Market Association showed the average daily volume of wholesale gold traded in October between the LBMA's clearing-member banks rising slightly from September.

Coming just shy of Oct. 2012 at 19.8 million ounces, however, that was the lowest October reading since 2010.

Last month saw sales of gold coins by leading bullion refiner the Perth Mint in Western Australia fall by one third, it said on its website.

Amid the drop in prices – the worst Dollar price drop since 1978 – "Evidently, some buyers still expect gold to fall even further," notes Commerzbank's commodity team, "and have thus been exercising restraint when it comes to purchasing coins."

With Google searches for the word "Bitcoin" rising 7-fold in the last month alone, the Financial Times reports that the UK's Royal Mint – currently state-owned – is considering "the possibility of manufacturing a physical commemorative coin with a Bitcoin theme."

 

Adrian Ash

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash is head of research at BullionVault, the physical gold and silver market for private investors online. City correspondent for Bill Bonner’s Daily Reckoning from 2003 to 2008, and previously head of editorial at London's top publisher of private-investment advice, Adrian is now a regular contributor to many leading analysis sites including Forbes and Gold-Eagle, and a regular guest on the BBC as well as international broadcasters. His views on the gold market are frequently quoted by the Financial Times, Daily Telegraph, MarketWatch and many other leading new outlets.

 

The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.

Gold Eagle twitter                Like Gold Eagle on Facebook